In long-term planning, American multinational corporations are looking with increased interest at eastern Europe and the potential benefits of investing in the fast-developing countries that will join the EU on the implementation of the Nice Treaty. The legal, regulatory and tariff reforms the applicant countries are undertaking will enhance their attractiveness for US corporations.
Several executives in the US tech and pharmaceutical sectors have said informally that following enlargement, the focus of corporate America could move to countries like Poland, Hungary, the Czech Republic and Estonia.
This is almost virgin territory for the US. The level of US investment has been very low, accounting for €5.25 billion (£4.14 billion), a mere 0.5 per cent of global US foreign direct investment assets. By contrast, in 1999 some 67.5 per cent of all foreign direct investment into candidate countries came from the EU. At 13.7 per cent of total, the 13 candidate countries together are the EU's second trade partner after the US.
The 13 aspirant nations barely feature in the list of major destinations for US exports, accounting for €6.1 billion, or 0.9 per cent of total US exports worldwide. Imports amount only to 0.8 per cent of the US total. Even this is unbalanced as Turkey is the 22nd most important export market for the US, while none of the others are in the top 50, according to the US Commerce Department.
Major US investment could rapidly change these figures. The preferred destinations of US companies seeking direct access to the European market are currently the Republic of Ireland, Scotland and the Netherlands. The main reasons cited by US chief executives are location, English-speaking workers, a well-educated workforce and corporate tax incentives, especially in the case of the Republic, where 140,000 people have jobs directly as a result of foreign investments.
Many new EU members will be geographically central in an enlarged EU, English is the lingua franca of most aspirant countries and all can offer the added incentive of lower wages. Unemployment has been increasing in all 13 countries, in contrast to a shortfall in skilled workers for direct investment projects in western Europe. Other factors could persuade the US to look eastwards.
Mr John McGowran, general manager of Intel Ireland, this week warned that the Republic's failure to meet the challenges of the physical and social infrastructure, and the growing costs of labour could alienate the US technology sector. Xerox UK boss Mr Bill Goode said recently that if they had to do it again the printer company would not have located its European call centre in Dublin, where it employs 1,000 people, because of problems like keeping staff.
Cities such as Prague, Tallinn and Warsaw could become more attractive to corporate America after joining a trade bloc with a single set of trade rules, a single tariff, a common competitive policy, common rules on intellectual property and common company law.
On the other hand, the expansion of the EU market to 500 million people enhances the trade environment for international companies already established in western Europe. In addition, while countries such as Hungary, Poland and the Czech Republic are starting to achieve higher levels of non-European direct investment, much of this is in heavy industries and consumer products, rather than in internationally traded services, on which the Republic has focused.
One US executive said that some US companies would want to see control over corruption and the establishment of a transparent business environment before making a major investment in a candidate country.
On the wider aspects of the Nice Treaty, US trade officials are pleased the enlargement is progressing, although EU officials said the US has been very active in pressuring candidate countries to lower tariffs in advance of accession.
Enlargement will nevertheless create a new dynamic in EU-US trade negotiations. The EU and the US are already each other's largest partners. The EU is by far the biggest investor in the US economy, accounting for 59.3 per cent of total foreign direct investment in 1998. Likewise 44.2 per cent of US investment stock is in the existing EU.
Enlargement will strengthen the EU as an economic power. As Swedish Finance Minister Mr Bosse Ringholm said recently, in his capacity as chairman of EU finance ministers, with 500 million inhabitants, the larger EU will be "less dependent on the United States and more able to control economic development ourselves".
